India's weak electricity demand signals more slowdown pain ahead

Economy policy

India is witnessing a listless growth in electricity demand, possibly signaling more slowdown in Asia’s third-largest economy.

Electricity requirement from distribution utilities in February rose 1.3 percent from a year earlier and barely changed from January’s 1.1 percent, the weakest growth in two years, according to the power ministry’s Central Electricity Authority. Data for power generation, a proxy for demand, showed the weakness continued into March.

The trend points to a lack of appetite among factories and commercial firms -- who consume about half the country’s electricity -- ahead of government data on industrial production for February that’s due Friday. Uncertainty about the outcome of a national election beginning Thursday, weak domestic demand and a global slowdown have clouded India’s economy.

Economic growth slowed to 6.6 percent in the three months to December, the weakest pace in six quarters. The International Monetary Fund Tuesday cut the nation’s growth outlook for this year to 7.3 percent from 7.5 percent seen in January.

“The industry is not growing at a fast pace,” said Devendra Kumar Pant, chief economist, at India Ratings and Research, the local unit of Fitch Group. “All leading indicators suggest sluggishness in industrial activities will continue for some time.”

India’s core infrastructure sector, which constitutes 40 percent of total industrial production, grew 2.1 percent in February, marginally improving from January’s 19-month low of 1.8 percent when electricity generation and production of refinery products contracted.


 While factory output data for March, which is published with a one-month lag, is due in May, early indicators point to a steepening slowdown.